Over the third quarter of 2018, Sydney dwelling values have fallen by -2.1% and values across regional NSW have fallen by -1.2%.

Over the past 12 months Sydney values have fallen by -7.2% while regional NSW values have increased by 1.2%. By comparison, 12 months ago Sydney values had increased by 10.3% and regional NSW values had increased by 9.9%.

While the Sydney market has been seeing values decline since August last year, values have only started decline in regional NSW since May 2018.

While dwelling values fall for the more expensive housing stock, lower valued stock continues to rise

Over the past year, dwelling values for the most affordable 25% of NSW housing stock has increased by 2.5% while the middle 50% of housing stock has fallen -3.2% and the most expensive 25% has recorded a decline of -8.1%.

In Sydney, the most affordable 25% of properties have fallen in value by -3.9% over the past year compared to a -6.5% fall across the middle 50% of the market and a much larger -8.7% fall across the 25% of most expensive properties.

Regional NSW dwelling values have increased 2.5% across the most affordable 25% of properties over the past year, are 2.0% higher across the middle 50% of properties and have fallen by -0.1% across the most expensive 25% of properties.

Settled transaction volumes in NSW are trending lower

Over the past three months there was 40,496 house and unit transactions settled in NSW which was -17.7% lower than over the same three month period last year.

In Sydney, there were 22,796 settlements over the three months to September 2018 which was -20.0% lower than the same period in 2017.

There were 17,700 house and unit sales settled in regional NSW over the three months to September 2018 which was -14.5% lower than the number over the second quarter of 2017.

Rental rates are falling in Sydney however, they remain fairly steady in regional NSW

Over the third quarter of 2018, Sydney rents fell by -1.5% while they increased by 0.1% over the period in regional NSW.

Throughout the past year, Sydney rental growth has slowed from a 4.1% increase to a -1.9% fall and in regional NSW annual rental growth was 3.4% a year ago and has slowed marginally to 2.5% over the past year.

Rental rates in Sydney are now -2.3% lower than they were at their peak while in regional NSW rents continue to climb.

With values falling faster than rents, yields are increasing from historic lows

Gross rental yields in Sydney were recorded at 3.23% in September 2018, up from 3.05% a year ago.

Regional NSW gross rental yields have increased from 4.48% in September 2017 to 4.53% in September 2018.

Growth in NSW state final demand has slowed but remains quite strong

State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets. It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories. Given it excludes exports and inventories it isn’t directly comparable to GDP.

State final demand in NSW increased by 0.3% over the June 2018 quarter which was the weakest quarterly growth in GSP since March 2017.

Over the past 12 months, NSW state final demand has increased by 3.5% which was slightly lower than the 4.0% increase in March 2018.

NSW’s labour force is much stronger than most other states and territories

The NSW trend unemployment rate was recorded at 4.5% in September 2018, the lowest it has been since April 2008.

Over the past 12 months, NSW has created 134,687 jobs.

Based on the 134,687 jobs created over the past year, total employment has increased by 3.4% and 46.8% of all jobs created nationally last year were in NSW.

Net overseas migration is the major driver of NSW population growth

Over the 12 months to March 2018, the population of NSW increased by 113,080 persons, the lowest it has been since March 2016.

Looking at the components, the 113,080 person population increase was comprised of 43,526 from natural increase, 90,060 persons from net overseas migration and there was a loss of 20,506 persons from net interstate migration.

Net overseas migration was the lowest it has been since September 2016 and the net outflow of residents to other states was the largest it has been since March 2009.

Approvals for units are well below recent peaks while house approvals remain high

In August 2018, there were 5,326 dwellings approved for construction in NSW which was – 10.5% lower over the month and -9.0% lower yearon-year.

Over the month there were 2,535 houses approved for construction, a fall of -0.9% over the month and -3.6% lower year-on-year.

Recent data points to an easing in unit approvals with 2,791 approvals in August 2018 the fewest since May 2017 and year-on-year approvals are -13.4% lower.

A very high number of dwellings were under construction across NSW at the end of June 2018

According to the ABS there were 89,038 dwellings under construction across NSW at the end of June 2018, which was only slightly lower than the historic high of 89,162 dwellings over the December 2017 quarter.

The 89,038 is split between: 21,371 new houses, 66,511 new units and 1,156 non-new dwellings.

The number of new houses under construction increased to its highest volume since March 1989 over the quarter while the number of new units under construction fell however, it was the fourth highest figure on record.

Housing finance commitments are easing across NSW

The total value of housing finance commitments in NSW during August 2018 was $12.1 billion which was 0.7% higher over the month but -22.5% lower from its recent peak.

The $12.1 billion was split between: $2.5 billion in owner occupier refinances, $5.0 billion in owner occupier new lending and $4.7 billion in lending to investors.

Although the value of lending rebounded over the month, all segments of lending across NSW are lower year-on-year and as a share of total lending investors have shrunk to their smallest share since February 2016.

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